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In a letter to shareholders, Ackman said he still believes that Citigroup is inexpensive, well-managed and will increase in value over time. However, he also stated that there are ways to make money that are “much easier” and decided to pull the “rip cord” after “one bad night’s sleep thinking about Citi.”

The fund began to purchase Citigroup around the second quarter of 2010. Looking back, it was a much different time for the industry. Since then, Europe’s credit crisis has made the environment more difficult for companies like Citigroup. Other problems such as the losses at JPMorgan Chase & Co. (NYSE:JPM) and the Libor interest rate fixing scandal broke, they were the “proverbial straw that broke this camel’s back,” Ackman wrote (read more about JP Morgan’s losses and the impact on investors).

When Ackman began his original position in Citigroup in the second quarter of 2010, shares were traded in a (split-adjusted) range of $35.30 to $50.70. Mr. Ackman did not mention the amount of the loss his fund realized, but was sizable since shares have recently traded as low as $24. While we cannot make an exact determination using incomplete data, we can make an educated guess and estimate how much Pershing Square and Mr. Ackman lost in Citigroup.

In our calculations we used the following parameters:

All numbers prior to 1:10 reverse split are adjusted.

Calculated Net Change in holdings each quarter.

Used the Median of Citi’s trading range each quarter for price per share.

Number of shares for dividend payments calculated at prior quarter amount +/- half net change of current quarter.

Final liquidation price per share used average closing price over the 45 calendar days prior to the announcement.

With this rough estimate, we concluded Pershing Square and Mr. Ackman may have lost $383.6 million or 35.3% on the liquidation of shares.

Ackman believes it is much easier to make money in Procter&Gamble than in Citigroup. We are very skeptical. Ackman probably thinks that the probability of a global recession is still very high, in which case investing in PG will yield better results than investing in Citigroup. However, we think Citigroup’s share price is already very depressed and the stock may gain 40% if the economy keeps growing in the 2-3% range. We don’t think PG can return 40% over the next 12 months.